Europe: Shares end volatile quarter higher

EUROPEAN shares rose on Friday (Mar 31), as fears of a full-blown banking crisis continued to recede and a record monthly drop in eurozone inflation figures and a dip in the US Federal Reserve’s favoured inflation gauge lifted sentiment.

The pan-European Stoxx 600 index closed 0.7 per cent higher.

The index was headed for a second-straight quarterly gain, but on track to end March slightly lower after action-packed weeks following the collapse of two mid-sized US lenders and the takeover of Credit Suisse.

Banks slipped 0.4 per cent — with Swedbank down 4.9 per cent. The banking sector dropped 14 per cent in March to post its worst monthly performance since 2020.

While a slew of measures to support the sector and a rally in technology stocks have pushed the Stoxx 600 to three-week highs, investors have not completely shaken off fears of risks in the future.

“What lies ahead is tricky. Our forecasts for economic growth and interest rates are largely sideways. We don’t expect rate cuts by the Federal Reserve or the ECB this year,” said Willem Sels, global CIO, Private Banking & Wealth Management at HSBC.

The market will have to reassess its dovish reaction as inflation, especially core inflation, was coming down “agonisingly slowly”, he added.

Eurostat data showed inflation in the eurozone dropped by the most on record in March. However, growth in core prices accelerated.

The European Central Bank (ECB) still has a “little way” to go with interest rate increases to vanquish core inflation, French ECB policymaker Francois Villeroy de Galhau said in a newspaper interview.

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“As core eurozone inflation edged up to a new all-time high in March we think policymakers will remain in hawkish mood for now,” Andrew Kenningham, chief Europe economist at Capital Economics, said in a note.

“Our forecast is for another 100bp of rate hikes in the coming months — substantially more than the markets are pricing in.”

Separate data showed US personal consumption expenditures inflation fell in February, with the core reading lower than expected.

Rate-sensitive tech shares and real estate stocks gained 0.5 per cent and 0.4 per cent, respectively.

Among individual stocks, Swiss engineering company ABB gained 1.8 per cent as it said it would launch its new US$1 billion share buyback on Apr 3 with the intention to buy up to 30 million of its shares.

Adidas gained 5 per cent as UBS raised the Germany-based athletics company’s price target, while H&M rose 3.4 per cent, amid a streak of analyst upgrades after the Swedish fashion retailer posted Q1 results above market expectations.

Retail shares continued to maintain momentum, adding 1.7 per cent. REUTERS